The scheme aims to avoid widespread layoffs caused by the COVID-19 pandemic and subsequent lockdown. Some 6.8 million people have been placed on furlough under the scheme since its launch, at an estimated cost to the taxpayer of £8bn ($9.8bn).

Dame Carolyn Fairbairn, director general of the Confederation of British Industry, said: “The chancellor is confronting a challenging balancing act deftly.”

UK prime minister Boris Johnson made clear on Sunday night that much of the UK would stay locked down until July and Fairbairn said the furlough extension would “protect millions of jobs” by “avoid[ing] a June cliff-edge”.

As well as extending the scheme, the chancellor said rules would be loosened to allow staff to begin to take part-time work while still on furlough.

Richard Burge, chief executive of London Chamber of Commerce and Industry, said the change would give companies vital “breathing space” as the economy reopens.

Mike Cherry, national chair of the Federation of Small Businesses (FSB), said the changes would “protect thousands of livelihoods over the months ahead”.

Chancellor Rishi Sunak makes a statement in the House of Commons on the government's economic package in response to the coronavirus outbreak. (PA)

However, Sunak also said employers would be asked to provide more support to the scheme from July. He promised further details later this month.

“Firms will, of course, want more detail on how they will contribute to the scheme in the future and will work with government to get this right,” Fairbairn said.

Edwin Morgan, director of policy at the Institute of Directors, said: "We now need further clarity around employers' contributions. Many firms that would normally be on strong footing are still in dire straits.”

Business groups urged the chancellor to continue to be nimble and flexible when it came to offering state support.

“There is no silver bullet to any of this and both government and industry are going to have to be adaptive, creative and flexible through what is likely to be a bumpy and turbulent flight into the future from now on,” said Stephen Phipson, chief executive of manufacturers union Make UK.